If the U.S. economy is getting better, then why are major retail chains closing thousands of stores? If we truly are in an "economic recovery", then why do sales figures continue to go down for large retailers all over the country? Without a doubt, the rise of Internet retailing giants such as Amazon.com have had a huge impact. Today, there are millions of Americans that actually prefer to shop online. But Internet shopping alone does not account for the great retail apocalypse that we are witnessing. In fact, some retail experts estimate that the Internet has accounted for only about 20 percent of the decline that we are seeing. Most of the rest of it can be accounted for by the slow, steady death of the middle class U.S. consumer. Median household income has declined for five years in a row, but all of our bills just keep going up. That means that the amount of disposable income that average Americans have continues to shrink, and that is really bad news for retailers.
To believe that the housing bubble caused the 2008 crash was is to ignore its origin in Federal Reserve policies that forced investors to reach for yield. Tragically, the Federal Reserve has done the same thing again – starving investors of safe returns, and promoting a reach for yield into increasingly elevated and speculative assets. Thinking about the crisis only from the perspective of housing, investors and policy-makers have allowed the same process to play out more broadly in the equity market. On a quantitative basis, the overvaluation of the equity market is greater percentage-wise, and greater dollar-wise, than the overvaluation of housing in 2006-2007. Impatient, crowd-following investors are all too willing to wastefully scatter seeds onto this parched desert, thinking that this is their only chance to sow. To wait patiently in the expectation of fertile soil and rain is not an act of pessimism, but an act of optimism and informed experience.
The Whole World Has Gone Into Debt
£9.48 in 1973 would have the same spending power as £100 today. The rising cost of retail goods means someone who was a millionaire 40 years ago would need £10,553,000 today to enjoy the same spending power.
Just when it seemed that the ever deteriorating situation in the Crimean, the unexpected plunge in Chinese exports which has sent the Yuan reeling again, the Copper slam which is down some 10% in two days, and the outright collapse in Japan's capital flows, not to mention the worst GDP print under Abe, may not be quite "priced in" by a market that is now expecting well beyond perfection in perpetuity, further shown by Goldman over the weekend which reprorted that revenue multiples have never been greater, and futures may finally dip, here came - right on schedule - the USDJPY levitation liftathon, which boosted futures from down 10 to barely unchanged, and which should be green by the second USDJPY ramp some time just after 8 am.
President Barack Obama has recently released his budget in which he calls for an “end of austerity.” This is an amazing statement from a president whose government has spent the highest percentage of GDP in history and added more to the national debt than all past presidents combined. What must he mean by austerity? The president’s rejection of austerity represents the Keynesian view which completely rejects austerity in favor of the “borrow and spend” — increase aggregate demand — approach to recession. What he really is rejecting is the infinitesimal cutbacks in the rate of spending increases and the political roadblocks to new spending programs. President Obama and Congress should get busy doing what is best for the economy and the American public instead of enriching themselves and those who feed at the public trough.
While the US may be rejoicing its daily stock market all time highs day after day, it may come as a surprise to many that global equity capitalization has hardly performed as impressively compared to its previous records set in mid-2007. In fact, between the last bubble peak, and mid-2013, there has been a $3.86 trillion decline in the value of equities to $53.8 trillion over this six year time period, according to data compiled by Bloomberg. Alas, in a world in which there is no longer even hope for growth without massive debt expansion, there is a cost to keeping global equities stable (and US stocks at record highs): that cost is $30 trillion, or nearly double the GDP of the United States, which is by how much global debt has risen over the same period. Specifically, total global debt has exploded by 40% in just 6 short years from 2007 to 2013, from "only" $70 trillion to over $100 trillion as of mid-2013, according to the BIS' just-released quarterly review.
Greek President Karolos Papoulias raised the issue of World War II reparations to his German counterpart Joachim Gauck currently on a 3-day official visit to Athens. But as expected, Gauck repeated the official legal position of Berlin. Karolos Papoulias told Gauck that Greece has not dropped its compensation claim over the Nazi atrocities and the enforced loan by the Nazi occupiers during the World War II. “I want to point out that Greece has never given up its claim of German reparations, ” Papoulias reportedly told Gauch at a private meeting in Presidential Manson adding “it is necessary to solve the problem with the earliest possible start of negotiations.”
Since 1999, the annual real economic growth rate has run at 1.94%, which is the lowest growth rate in history including the "Great Depression." While the Fed's ongoing interventions since 2009 have provided support to the current economic cycle, they have not "repealed" the business cycle completely. The Fed's actions work to pull forward future consumption to support the current economy. This has boosted corporate profitability at a time when the effectiveness of corporate profitability tools were most effective. However, such actions leave a void in the future that must be filled by organic economic growth. The problem comes when such growth does not appear. With the economy continuing to "struggle" at an anaemic pace, the effects of cost cutting are becoming less effective. This is not a "bearish" prediction of an impending economic crash, but rather just a realization that all economic, and earnings, forecasts, are subject to the overall business cycle.
Is the U.S. economy steamrolling toward another recession? Will 2014 turn out to be a major "turning point" when we look back on it? Before we get to the evidence, it is important to note that there are many economists that believe that the United States never actually got out of the last recession. In fact, that would fit with the daily reality of tens of millions of Americans that are deeply suffering in this harsh economic environment. But no matter whether we are in a "recession" at the moment or not, there are an increasing number of indications that we are rapidly plunging into another major economic slowdown. The following are the top 12 signs that the U.S. economy is heading toward another recession...
Mainstream media discussion of the macro economic picture goes something like this: “When there is a recession, the Fed should stimulate. We know from history the recovery comes about 12-18 months after stimulus. We stimulated, we printed a lot of money, we waited 18 months. So the economy ipso facto has recovered. Or it’s just about to recover, any time now.” But to quote the comedian Richard Pryor, “Who ya gonna believe? Me or your lying eyes?” However, as Hayek said, the more the state centrally plans, the more difficult it becomes for the individual to plan. Economic growth is not something that just happens. It requires saving. It requires investment and capital accumulation. And it requires the real market process. It is not a delicate flower but it requires some degree of legal stability and property rights. And when you get in the way of these things, the capital accumulation stops and the economy stagnates.
While most attention has been focused on Nat Gas, BofA notes that Russia is unlikely to unilaterally curtail its oil exports. However, Russian oil does indeed flow in large quantities through the Black Sea, making the Russian Navy station of Sevastopol as well as the whole Crimean peninsula crucial strongholds to control commerce flows. While BofA remains confident that oil-related sanctions are unlikely (as Europe cannot really afford to relapse into a third recession in six years), Brent prices could easily jump $10 on any disruption increasing the risk of recession for a number of weak economies.
Keynesian stimulus always has been presented as a government action that improved general or overall economic conditions, as opposed to being a political wealth-transfer scheme. In reality, the government-based stimulus is based upon bad economics or, to be more specific, one of bad economic logic. To a Keynesian, an economy is a homogeneous mass into which the government stirs new batches of currency. The more currency thrown into the mix, the better the economy operates. Austrian economists, on the other hand, recognize the relationships within the economy, including relationships of factors of production to one another, and how those factors can be directed to their highest-valued uses, according to consumer choices. The U.S. economy remains mired in the mix of low output and high unemployment not because governments are failing to spend enough money but rather because governments are blocking the free flow of both consumers’ and producers’ goods and preventing the real economic relationships to take place and trying to force artificial relationships, instead.
Take Ray Selent, a 30-year-old former retail clerk in Fort Lauderdale, Fla. He was unemployed in 2012 when he enrolled as a part-time student at Broward County's community college. That allowed him to borrow thousands of dollars to pay rent to his mother, cover his cellphone bill and catch the occasional movie... Tommie Matherne, a 32-year-old married father of five in Billings, Mont., has been going to school since 2010, when he realized the $10 an hour he was making as a mall security guard wasn't covering his family's expenses. He uses roughly $2,000 in student loans each year to stock his fridge and catch up on bills. "We've been taking whatever we can for student loans every year, taking whatever we have left over and using it to stock up the freezer just so we have a couple extra months where we don't have to worry about food,"... Mr. Selent, of Fort Lauderdale, knows he is getting himself deeper in a hole but prefers that to the alternative of making minimum wage. In his 20s, he earned a bachelor's degree in communications from a local for-profit school but couldn't find a job.... He is now taking courses for a degree in theater so he can become an actor.
In the aftermath of the recent Wall Street Journal profile piece that, rather meaninglessly, shifted attention to Bill Gross as quirky manager (who isn't) to justify El-Erian's departure and ignoring Bill Gross as the man who built up the largest bond fund in the world, the sole head of Pimco was eager to return to what he does best - thinking about the future and sharing his thoughts with one of his trademark monthly letters without an estranged El-Erian by his side. He did that moments ago with "The Second Coming" in which the 69-year-old Ohian appears to have pulled a Hugh Hendry, and in a letter shrouded in caveats and skepticism, goes on to essentially plug "risk" assets. To wit: "As long as artificially low policy rates persist, then artificially high-priced risk assets are not necessarily mispriced. Low returning, yes, but mispriced? Not necessarily.... In plain English – stocks, bonds and other “carry”-sensitive assets would outperform cash."